Thursday, June 1, 2017

Many Russians Will Not Live to See End of Country’s Economic Crisis, Moscow Experts Say

Paul
Goble

Staunton, June 1 – Most Russians
will not live long enough to see the end of their country’s economic crisis.
Their real incomes will continue to stagnate at least for another decade, the
divergence between rich and poor will increase, and Russian pensions may not
rise in real terms for two decades, according to Moscow experts.

In
Nezavisimaya gazeta, Anastasiya
Bashkatova, an economics reporter, directly asserts that “a significant part of
Russians will not get out of the crisis” because what she and others call “income
dystrophy”—stagnant pay and rising income inequality -- is now “an illness
characteristic of the Russian economy.

In
the “fat” years before 2008, the trends were going in the other direction. But
since 2013, “the real incomes of citizens have begun to contract and this
tendency has not stopped,” although it may not be quite as bad as official
statistics show, Bashkatova says, because many Russians do get money from the
shadow economy.

“It
is possible that this helps citizens to soften the consequences of the crisis
but this does not reduce the risk for them that an employer may cut also those
in the gray sectors, where neither pay nor bonuses are fixed.”

The
Moscow experts she surveyed were unanimously pessimistic about the future,
although some expected an uptick next year when the Kremlin will try to boost
figures in advance of the presidential elections.

Kirill
Yakovenko of the Alor Broker Company, says that “the reduction of real incomes
of the population bears a long-term character and it is hardly likely that this
problem will exhaust itself in the next 1.5 to 2 years.” And Pavel Sigal, vice
president of Russia Reliance, says that he does not exclude the possibility
that by 2025, the number of poor in Russia will reach 30 million.

The
report in Vedomosti yesterday was
even more damning. Its headline says that “incomes of Russians will return to
pre-crisis levels only in 2022 and pensions will never” recover to that level
as far out as anyone can now predict or even as the government expects (vedomosti.ru/economics/articles/2017/05/31/692224-dohodi-vernutsya).

Indeed,
the paper continues, the economic development ministry has prepared a report, a
copy of which Vedomosti says it has,
showing that it does not expect any growth in the real value of pensions over
the next 20 years, even as it anticipates a rise in the pension ages to 65 for
men and 63 for women.

Importantly,
the ministry report notes the demographic impact of this: “The number of
pensioners will decline 23 percent by 2035,” seven million fewer than now. If
pension ages aren’t raised, in contrast, the number of pensioners would go up by
5.4 million.The age increase will mean
there will be one million more workers. Without it, there would be 3.2 million
fewer.

At
the same time, the increase in pension ages will be accompanied by “a sharp
fall in the level of pensions: they will decline from the current 35 percent to
22 percent” relative to wages paid, something that reduces “the burden” on
workers but does nothing to boost consumer demand and thus a major reason for
companies to increase investments.

According
to the ministry report, the Moscow paper continues, “wages and incomes for the
next two decades will grow more slowly than the economy,” but the growth of the
economy “also will be far from outstanding.”And the combination of these two trends may have serious consequences
for Russia’s future.

On
the one hand, Oksana Sinyavskaya of the Moscow Institute of Social Policy,
says, the notion that pensions can be “frozen” for 20 years is unrealistic and “socially
dangerous.”And on the other, Vladimir
Tikhomirov, an economist at the BKS Brokerage, says that the ministry’s notion
that there can be economic growth while pensions are cut is unrealistic.

If
there is no increase in demand – and there won’t be if wages and pensions are
stagnant – he says, there won’t be much investment. That is an economic truism
in all countries, and Russia isn’t going to be able to escape it.He does not say, but there is one way out:
the way Stalin adopted in the 1930s: totalitarian control and radical
extraction of money from the people.